Archives 2024

Tax Season Recap and Financial Wellness

by agwebadmin Uncategorized

Thank you for your patience and for trusting FKYG with your taxes. We’ve successfully navigated through the most challenging time of the year together! As the dust settles on another busy tax season, we hope you’ve had a chance to relax and reflect on your financial goals. In this edition of our newsletter, we provide a recap of the recent tax season, highlight key updates from the IRS, and share some valuable financial wellness tips to keep you on track throughout the year.

Post Tax Season Summary

This year’s tax season brought us several important updates and reminders that are essential to note.

One major development was the IRS granting extensions to many taxpayers affected by natural disasters. If you were among those impacted, it’s crucial to be aware of the new deadlines to ensure you file your taxes on time without incurring penalties. Additionally, the expanded Child Tax Credit provided significant relief to many families. It’s important to keep detailed records of any advance payments you received, as these will need to be accurately reported in your tax filings next year.

Another significant aspect was the reporting of Economic Impact Payments. Properly accounting for these payments on your tax return is essential to avoid delays in processing. Many taxpayers faced issues due to inaccuracies in reporting these payments, so double-checking your records against IRS guidelines can save you from future hassles.

Financial Wellness Tips

Achieving financial wellness is a continuous journey that involves careful planning and smart decision-making.

Creating a budget is a fundamental step. By tracking your income and expenses, you can understand where your money is going and identify areas where you can save. This awareness can help you make informed financial decisions and avoid unnecessary spending.

Building an emergency fund is equally important. Aim to save three to six months’ worth of living expenses. This fund will provide a financial cushion in case of unexpected events like job loss or medical emergencies.

Investing wisely is another key component of financial wellness. Diversifying your investments helps manage risk and can lead to better returns over time. Consider consulting with a financial advisor to develop an investment strategy that aligns with your goals and risk tolerance.

Conservation Easement Update

A qualified conservation contribution, or conservation easement, under IRC Sec. 170(h), is a donation of certain rights over real property that permanently restricts its use for conservation purposes. These purposes can include public recreation, scenic preservation, wildlife habitat, or historic preservation. While the landowner retains ownership and control of the real estate, its future use is limited. In return, the owner enjoys significant tax benefits. In recent years, however, IRS has faced continuous challenges in its attempts to curb abusive transactions related to conservation easements. These challenges often cite violations of the Administrative Procedure Act (APA), which governs how federal agencies develop and issue regulations.

There has been multiple court cases surrounding Conservation Easement. The IRS’s “extinguishment regulations” under Reg. 1.170A-14(g)(6)(ii), which prohibits conservation easement if the donor reserves rights to remove property from the easement, has been frequently litigated. In March 2024, the Tax Court ruled in favor of Valley Park Ranch LLC, holding that the IRS’s rule on extinguishment clauses was “procedurally invalid” under the APA. In other cases like Tanyard Farms LLC, IRS faced scrutiny for its discovery process, particularly in how it communicated with individual LLC investors. The court required the IRS to issue revised letters clarifying their adversarial role and the voluntary nature of investor cooperation.

In November 2023, the IRS issued proposed regulations aimed at tightening conservation easement rules. These include a disallowance rule preventing taxpayers from claiming deductions exceeding 2.5 times their basis in the partnership or S corporation making the contribution. There are exceptions to this rule, but they come with stringent conditions. The proposed regulations have raised concerns due to their complexity, which may deter taxpayers from attempting such contributions. Critics argue that the IRS might be intentionally complicating the rules to discourage these transactions.

The invalidation of the extinguishment regulations might lead to less strict standards for future conservation easement deductions, but it also introduces uncertainty. The IRS may revise existing regulations or introduce new guidelines, so we might expect scrutiny of all regulations for APA compliance. As developments unfold, we should stay informed and prepared for potential changes.

Upcoming Important Tax Deadlines

  • June 15: This is the deadline for making your second estimated tax payment for the year. Ensure you’ve calculated your taxes accurately to avoid any penalties.
  • July 31: If you have an employee benefit plan, this is the deadline for filing Form 5500. Make sure all necessary documentation is prepared and submitted on time.

We’re Here to Help!

If you have any questions or need assistance with your financial planning, please don’t hesitate to contact our office. Our team is dedicated to helping you achieve your financial goals.

Thank you again for trusting us with your tax and financial needs.

Spring Cleaning Your Finances

by agwebadmin Uncategorized

Greetings from FKYG again! As we step into the second quarter of 2024, we are excited to bring you the latest updates, insights, and tips from the world of finance and accounting. Our April newsletter is packed with valuable information to help you navigate the complexities of tax season, stay informed about recent regulatory changes, and make strategic decisions for your business and personal finances.

In this edition, you’ll find:

  • Recommended strategies to avoid early IRA withdrawal penalties
  • New IRS publications that help you optimize your financial planning and safeguard your privacy
  • Discussion on exploring Artificial Intelligence in Tax Services

Avoid the Penalty Tax on Early IRA Withdrawals

As financial advisors, it is essential to assist clients who may need to access their IRA funds before reaching the age of 59½. While you have the flexibility to withdraw from their IRAs at any time, withdrawals before age 59½ usually incur penalties. Typically, early withdrawals are subject to income tax and a 10% early withdrawal penalty. Suppose you find yourself in this situation, we recommend several exceptions to this rule exist to mitigate this penalty, and understanding these can significantly benefit you and help you preserve your assets.

Substantially Equal Periodic Payments (SEPPs): If you are facing financial hardship in later stages of life, SEPPs can provide significant penalty-free withdrawals. This involves receiving a series of annual payments based on life expectancy. However, there are a few caveats you need to look out for: 

  • Clients must continue SEPPs for at least five years or until they reach age 59½, whichever is longer. Any cessation or incorrect calculation of these payments can trigger the 10% penalty on all prior withdrawals.
  • There are different IRS-approved methods for calculating SEPPs, such as Required Minimum Distribution (RMD) Method (simplest to calculate), Fixed Amortization Method (based a chosen interest rate), and Fixed Annuitization Method (converts the account balance into an annuity). Be thoughtful and select the one works best for you.
Higher Education Expense: Withdrawals used for qualified higher education expenses for the account owner, their spouse, or dependents are penalty-free. This includes tuition, fees, books, and required supplies.

Medical Expenses: Withdrawals exceeding 7.5% of the account owner’s adjusted gross income (AGI) are exempt from the penalty, regardless of whether the owner itemizes deductions.
 
Military Reservists: Reservists called to active duty for at least 180 days can withdraw penalty-free.
 
Disability: Withdrawals are penalty-free you are permanently disabled and can’t engage in any substantial gainful activity.
 
First-time Home Purchases: Up to $10,000 can be withdrawn penalty-free for the purchase of a first home for you or qualifying relatives.
 
Health Insurance During Unemployment: Withdrawals to pay for health insurance premiums during periods of extended unemployment (after 12 consecutive weeks of receiving unemployment compensation) are exempt from the penalty.
 
Emergency Expenses: Starting in 2024, up to $1,000 annually for urgent personal expenses can be withdrawn without penalty.
 
Disaster Recovery: Up to $22,000 can be withdrawn penalty-free for qualified disaster recovery expenses.
 
Being aware of and utilizing these exceptions can offer clients substantial financial relief and flexibility when accessing their IRA funds early. It is imperative to ensure clients are fully informed about these options and the strict adherence required to avoid unnecessary penalties.
Dirty Dozen Campaign: Phishing and Smishing Scam Warnings

The IRS’s 2024 Dirty Dozen campaign focuses on prevalent scams like phishing and smishing aiming to steal sensitive information via fraudulent emails and texts. Businesses are cautioned against dubious Employee Retention Credit (ERC) claims, as improper filings could lead to severe penalties and criminal charges. Taxpayers should avoid unauthorized third-party assistance for setting up IRS online accounts to prevent identity theft, and be wary of promoters pushing improper fuel tax credit claims, which promise large refunds but leave taxpayers liable for false claims. If you are an existing FKYG client, please inform us in case of any suspicious scamming activities.

Solar and Wind Energy Facilities in Low-Income Communities

The IRS has issued Rev. Proc. 2024-19, offering guidance on solar and wind energy facilities in low-income communities. The procedure clarifies application and documentation requirements for the 2024 program year and details how the capacity limitation will be allocated across different facility categories. Under IRC Sec. 48(e), introduced by the Inflation Reduction Act, an increased energy investment credit is available for solar and wind facilities that secure an environmental justice capacity allocation and are properly placed in service. Definitions and program requirements are outlined in the final regulations (TD 9979). For more information, see News Release IR-2024-86.

Embracing Al: Creating a Future-ready Tax Practice

In the past few decades, Artificial Intelligence (AI) has rapidly evolved, transitioning from a futuristic concept to an integral part of daily discourse. Nowadays, Generative AI, exemplified by Large Language Models (LLMs) like ChatGPT has permeated daily routines, aiding in tasks ranging from crafting humorous poems to summarizing complex subjects for work. AI’s role extends beyond content creation, assisting with tasks like generating complex Excel formulas to summarize client data efficiently

Is it a good idea to use AI for taxes? That’s a bit complicated. While some tax professionals believe they can leverage AI to enhance client service and streamline tasks, freeing up time for strategic activities, others are hesitant to embrace AI, viewing it as a technological shift rather than an investment in future efficiency and effectiveness. On one hand, embracing AI can provide cutting-edge tools to navigate the ever-changing tax landscape effectively. Tax professionals can focus more on providing strategic advice to clients, leveraging AI’s capabilities to augment their expertise; On the other hand, caution is advised when dealing with sensitive information, as AI chat services may lack access to up-to-date data, leading to inaccurate responses. Moreover, since interactions with AI environments may not be private, sensitive client information should be avoided.

Though the outlook of AI for taxes remains uncertain, we consider embracing AI responsibly to be a niche to enhance client service, transform challenges into opportunities, and embrace a future of innovation and growth.

We hope you find this newsletter informative and helpful. As always, our team is here to assist you with any questions or needs you may have. Happy reading, and here’s to a successful and financially sound 2024!

Unlock Your March Tax Wisdom

by agwebadmin Uncategorized

As we transition into March, we inevitably run into the good old season of tax preparation. At FKYG, we’re dedicated to empowering you with the knowledge and guidance needed to navigate through tax complexities seamlessly. In this edition of our newsletter, we’re excited to share some invaluable tax tips and insights tailored to optimize your financial strategies. Whether you’re a small business owner, an individual taxpayer, or managing corporate finances, we have expert advice to help you make the most out of this tax season and beyond. Let’s dig in to the latest IRS regulations updates, incoming tax deadlines for fishers & farmers, and a quick tutorial on “Single Partner Partnership” situation!

Update on Emergency Savings Accounts: A Quick Overview

Effective from 2024 onwards, the SECURE 2.0 Act empowers plan sponsors to amend their retirement plans, including 401(k), 403(b), or governmental 457(b) plans, to incorporate emergency savings accounts for non-highly compensated employees.

Plan sponsors can establish these accounts, offering automatic enrollment up to 3% of salary or allowing participants to contribute voluntarily, with an annual cap of $2,500 (adjusted for inflation). Contributions are made post-tax, with excess amounts routed to a Roth account if available. Participants can withdraw funds monthly for any reason, subject to fees after the fourth withdrawal. Employers matching retirement plan contributions must also match contributions to emergency savings accounts. The IRS’s Notice 2024-22 addresses potential abuse, permitting reasonable anti-abuse measures by plan sponsors. Similarly, the DOL issued FAQs covering automatic enrollment, contribution limits, and permissible investments.

While these accounts offer financial flexibility, they come with significant administrative and fiduciary responsibilities. Some employers may find it simpler to allow penalty-free withdrawals under the SECURE 2.0 Act for immediate needs. Pension-linked emergency savings accounts provide an avenue for employees to access funds without resorting to tapping into retirement savings prematurely. Although optional, they offer valuable benefits for financial planning. If you believe you can benefit from this new act, don’t hesitate to let us know!

IRS Opens Applications for Low Income Taxpayer Clinic Grants

The IRS is accepting applications until April 10, 2024, for Low Income Taxpayer Clinic (LITC) matching grants. These grants support the development, expansion, or maintenance of LITCs, ensuring fairness in the tax system by offering pro bono representation to low-income taxpayers. Priority is given to established organizations, particularly serving underserved areas. The President’s budget request includes continued funding at $26 million, with a $200,000 per award funding cap. If you have any questions or need assistance regarding this topic, feel free to reach out to us.

March 1st Deadline Alert for Farmers and Fishers

A friendly nudge to farmers and fishers who skipped estimated payments: March 1, 2024, is your deadline to file your 2023 federal return and settle your taxes – avoid penalties by meeting this cutoff! For those who made estimated tax payments at least 66.67% of their 2023 total tax or 100% of their 2022 total tax by January 16, 2024, you have until April 15, 2024. Note that only those who earned at least two-thirds of their gross income from farming or fishing in 2022 or 2023 are eligible for this extension. Not sure which category you fit in and whether you want to extend? We’re  always here to answer your questions.

There's Only One Partner after Partnership Interests Are Sold...

When it comes to selling partnership interests, including those in LLCs classified as partnerships, the tax landscape can get intricate. But what happens when there’s only one partner left after the dust settles? Let’s break it down. After a sale, if there’s only one partner remaining, the partnership is essentially terminated for tax purposes. This triggers some interesting tax consequences for the buyer. For the buyer, a series of “pretend” transactions unfold. They’re treated as if the partnership liquidated its assets and distributed them to the departing partner(s). Then, the buyer purchases these assets from the departing partner(s).

  • Consider Jack and Bobbie, each owning half of Garden Designs LLC, a partnership. When Jack sells his half to Bobbie, Garden Designs transforms into a disregarded Single-Member LLC (SMLLC) for tax purposes. Jack reports capital gain on the sale, while Bobbie is treated as acquiring all assets from the liquidation, paying $100,000 for them.
  • Now, if a third party like Aaron buys both Jack’s and Bobbie’s interests, the same principles apply. Garden Designs becomes an SMLLC, and Aaron calculates his basis as if he bought the assets from Jack and Bobbie post-liquidation.

In Conclusion, after a partnership interests sale leaves only one owner, there’s a series of “pretend” transactions for the buyer, shaping the tax implications. While it may seem complex, understanding these nuances is crucial for navigating tax obligations effectively. Let us be your compass through the intricacies of this topic. Get in touch for expert guidance tailored to your needs.

Love Your Finances This February

by agwebadmin Uncategorized

As we embark on the journey through the month of love, we are delighted to present you with a curated selection of valuable financial insights aimed at enhancing your financial well-being. This February, we delve into essential topics including investment strategies designed to optimize your portfolio, the importance of collaboration between your tax and financial professionals to achieve financial success, some crucial IRS regulation updates on Vehicle Depreciation, Childcare Tax Credit, and more! With a commitment to empowering your path to prosperity, FKYG invites you to this month’s share of knowledge and tools necessary to navigate the financial landscape with confidence.

The Intersection of Tax and Financial Planning

In the world of finance, top-tiered tax-efficient strategies are like a hidden treasure – It not only preserves your hard-earned wealth but also propels your financial journey forward. Due to the common lack of communication between your tax professional and financial planner, the results could be suboptimal. Today, we will embark on an enlightening journey through some savvy financial maneuvers. These insights into tax-efficient strategies and investment vehicles that could potentially revolutionize your financial landscape.

ETFs and Index Funds
  • Exchange-Traded Funds and Index Funds are the top choices in tax-efficient investing. ETFs boast lower capital gains distributions compared to traditional mutual funds. Similarly, Index Funds, minimize taxable events with their tracking of market indices. This way, investors can optimize their portfolios and reduce tax implications. However, it’s crucial to consult with financial professionals to ensure alignment with investment goals and risk tolerance.
Qualified Opportunity Fund
  • Channeling capital gains into QOFs, investors can delay paying taxes on their gains until a later date. While the tax advantages can be appealing, it’s crucial to carefully weigh the benefits against the holding period required to unlock them. With evolving rules and nuances, consulting with financial advisors or tax professionals is paramount to making informed investment decisions in the realm of QOFs.
Municipal Bonds
  • For income-seeking investors, municipal bonds emerge as a beacon by offering an attractive source of steady income while minimizing tax liabilities. Unlike taxable bonds, muni bond interest is typically exempt from federal taxes and may also be exempt from state taxes. However, investors should make sure alignment with their financial goals and risk tolerance before incorporating muni bonds into investment portfolios.

Overall, we see that collaboration between tax professionals and financial advisors is key to unlocking the full potential of tax-efficient strategies. Even small improvements in after-tax returns can have a significant impact on long-term portfolio success.

We encourage you to reach out to us to explore how these strategies can be tailored to your unique financial objectives. Together, let’s navigate the maze of taxes and investments, ensuring your financial ship sails smoothly towards prosperity. 

New IRS Employer-Provided Childcare Tax Credit Web Page

The IRS has launched a new web page on IRS.gov to guide businesses on leveraging the Employer-Provided Childcare Tax Credit, offering relief for those providing childcare services to employees. This tax credit of up to $150,000 annually aims to alleviate expenses by covering 25% of qualified childcare facility expenditures and 10% of other qualified childcare expenses. It allows for carryback and carryforward options under general business credit for up to 20 years. Explore further details on the IRS’s new web page at their site for the latest updates!

2024 Vehicle Depreciation Limits Released by IRS

Stay informed about the latest Section 280F depreciation deduction limits for passenger autos, including trucks and vans, placed in service during 2024. For passenger autos subject to bonus depreciation, the limits are $20,400 for the first year, $19,800 for the second year, $11,900 for the third year, and $7,160 for subsequent years. For autos not eligible for bonus depreciation, the limits are $12,400 for the first year, with subsequent years following a similar pattern. Wanna see what’s the best treatments for your car? We would love to chat further!

IRS Updates Form 1099-K FAQs for Clarity

Discover the latest revisions to the IRS’s frequently asked questions for Form 1099-K, Payment Card and Third Party Network Transactions, including significant changes in key sections such as General Information, What to Do If You Receive a Form 1099-K, etc. New questions now cover sales through resale ticket sites, online marketplaces, and proceeds from crowdfunding. The IRS has also refreshed the “Understanding your Form 1099-K” page on IRS.gov. Additionally, note that reporting is only required if you receive over $20,000 and have more than 200 transactions in 2023. Reach out to us with any questions regarding your Form 1099-K—we’re here to help you navigate through the complexities with confidence.

Adjusted Employer Shared Responsibility Payment Amounts

IRS just unveiled the adjusted employer-shared responsibility payment (ESRP) amounts for 2025. For 2025, the adjusted amount under Code Sec. 4980H(c)(1) rises to $2,900, while the adjusted amount under Code Sec. 4980H(b)(1) increases to $4,350. Large employers are subject to the ESRP if they fail to offer minimum essential coverage under an eligible employer-sponsored plan. This payment is calculated by multiplying the applicable payment amount by the number of full-time employees. The applicable payment amount escalates for large employers with employees enrolled in a Marketplace health plan and receiving premium tax credits.

Welcome to FKYG’s Latest Tax Insights

by agwebadmin Uncategorized

In our efforts to stay connected more efficiently, we have decided to enhance our communication channels. Our email newsletter will be a convenient way for us to keep you updated on important financial news, tax tips, and updates from our firm. You can expect to receive valuable insights directly to your inbox, making it easier for you to stay informed. As we step into the new year, it brings with it a landscape of updates and changes in the tax arena. In this Newsletter, we bring you essential insights tailored for both individuals and business taxpayers – let’s navigate these changes together. 

For our individual clients, we examine the IRS’s announcement of a delay in $600 reporting thresholds and the evolving landscape of retirement account catch-up contributions; for our business clients, we cover topics such as FinCEN’s updated FAQs on beneficial ownership reporting, the Texas Comptroller’s latest guidance on the No Tax Due report, and changes in the first-year bonus depreciation rate under Section 179. 

At FKYG, we are committed to helping our valued customers stay on top of their financial game. We look forward to this enhanced communication journey and continuing to support you in all your financial needs.

Check Out 2024 Tax Season Information Here!

Retirement Scoop: Unpacking the New Catch-up Contribution Rules!

A quick update on retirement contributions! The SECURE Act 2.0 shook things up, especially if you’re 50 or older and keen on boosting your retirement stash.

The 401(k) contribution limit has been set at $23,000, with a catch-up limit of $7,500 for those 50 and older. When it comes to employer and employee contributions, the combined limit is now $69,000. Additionally, the 401(k) compensation limit is capped at $345,000. For the saver’s credit, the income limits have increased to $38,250 for individuals and $76,500 for couples.

In a nutshell, retirement contributions are like a superhero cape for your future. Keep saving, keep smiling, and cheers to comfy retirements!

IRS: $600 Form 1099-K Reporting Threshold Delayed

Heads up! The IRS has delayed the $600 Form 1099-K reporting threshold for third-party settlement organizations to 2023, treating it as a transition year. No reporting is required unless you exceed $20,000 and 200 transactions. For 2024, the threshold drops to $5,000. Updates to Form 1040 are expected for easier reporting in 2024. Check Fact Sheet 2023-27 for details, and stay tuned for more here. In case of any questions, feel free to follow up with us!

FinCEN's New FAQs on Beneficial Ownership Reporting

FinCEN has released updated FAQs on Beneficial Ownership Information (BOI) reporting, effective from 1/1/24 under the Corporate Transparency Act. Business entities in the U.S. are now required to report beneficial ownership details to FinCEN. FAQs cover reporting companies, owners, applicants, requirements, initial reports, and exemptions. Questions? Reach out! Consult with our team to make the most out of these changes.

Texas Comptroller's New Guidance on No Tax Due Report

The Texas Comptroller of Public Accounts has issued guidance regarding changes to the franchise tax No Tax Due Report (Form 05-163). Effective from 1/1/24, Senate Bill 3 increases the franchise tax exemption to $2.47 million. Notably, businesses under this threshold are no longer required to file a No Tax Due Report. The 2024 report year and beyond will discontinue the No Tax Due Report. To ensure compliance with the latest requirements outlined in this guidance, our team is available to assist in all possible ways.

Shrinking First-Year Bonus Depreciation Rate

The first-year bonus depreciation rate has taken a dip from 100% to 80% for assets placed in service in 2023, with a plan to hit 0% after 2026. If you are into maximizing deductions, the decision between bonus depreciation and Section 179 comes from your business and individual needs. There’s an annual limit, a phase-down twist, and a business income factor to keep in mind. You might also want to consider when to claim your deductions and state tax implications. But fret not, we’re here to guide you through these changes.